www.11abril.com February 14, 2003 Alexandra Beech New York 14 de February del 2003

Good day,

Venezuela disappeared from the international news radar, except for a front page article on the Wall Street Journal. The wires and papers ignored the country, on the day after that the National Assembly approved the text of a historic measure, the Law of Social Responsibility for Radio and Television, which is the first step towards the systematic censure of the country's media. While the law has yet to be passed, the government's party dominated National Assembly will now begin the next phase of debating its articles. (The country's telecommunications regulatory agency, Conatel, already ordered Globovision, a 24 hour news channel, to begin airing three hours of children's programming per day, between 3 and 8 pm. The channel refuses, saying that being obligated to change its format would violate article 58 of the Constitution, which states that all persons have the right to receive opportune information). Another important item missed by international news is that yesterday, 597 more PDVSA workers were fired, bringing the total to a whopping 12,400 out of an initial 40,000.

The Wall Street Journal reports that "Venezuela's oil industry is expected to remain hobbled indefinitely even after the current strike is settled", which "could leave global petroleum markets vulnerable in the event of war with Iraq and increase the prospect of further gasoline-price increases." It poses that production levels will not exceed 2 million bpd this year, "hindered by a lack of experienced employees and managers." Analysts place current production at 1.4 million barrels per day, largely ignoring Chavez's 1.9 figure. Our contacts in the field estimate that oil production will level off at 1.5 million barrels per day. In addition, the Journal reports that "Venezuela has permanently lost as much as 400,000 barrels a day, or more than 10% of its total output," as low-pressure wells fill with sand, older wells need maintenance, and "Venezuela's signature heavy petroleum, meanwhile, tends to congeal when shut down and may take months to get flowing again."

Meanwhile, "storage bottlenecks have prevented heavy-oil joint ventures from resuming production." While Exxon said it planned to load synthetic crude, "Sincor, an extra-heavy-oil operation shared by TotalFinaElf SA, Statoil ASA and Petroleos de Venezuela, said it may resume production in weeks, but that depends on whether the venture can get enough natural gas to break down the heavy petroleum and make it usable in U.S. Gulf Coast refineries." Natural gas has been scarce since the beginning of the strike. Charles Beech, a local contractor, told me: "that was the key: shut down gas production and refineries automatically shut themselves down, as automated safety measures are self implemented by these state of the art facilities." In addition, he says that "PDVSA as of yesterday was compressing 4598 million cubic feet of gas daily, it´s normal pre-strike levels were 9400 million cubic feet per day, therefore they are 49% to pre-strike levels." Moreover, the Journal reports the "problems are compounded by a natural production-decline rate across the industry of 20% a year, which is particularly steep." Mr. Beech says that "as natural flowing well formations are over produced, reservoir pressures will start to decline, especially in the north Monagas fields which have accounted for most of the production increases in Venezuela. " In many of these wells," he continues, "we have information that chokes have been removed, and are presently producing at their maximum capacity." Chokes are implemented as a mechanism of preventing the over-production of a well, guaranteeing a longer and more productive life for the formation. Moreover, workers hired during the strike lack knowledge of the wells, "especially those that require technical expertise to force oil to the surface."

In addition, "Venezuela's failure to restore normal operations at its five refineries has created severe domestic gasoline shortages that have led the country to buy the fuel from Europe and the U.S. -- gasoline that normally would be produced and stored to prepare for the U.S. summer driving season. In the past month, Venezuela, normally a gasoline exporter, has purchased more than 12 million barrels of gasoline, some of which is still due to arrive," according to the Journal. Lifting the strike in other sectors actually helped the opposition, as an increase in domestic gasoline demand has created further social discontent and increased pressure on the government to negotiate for early elections.

The Venezuelan benchmark DCB's are currently trading at 69(bid) and 69.14 (ask) for a bid spread of 1,865 basis points, lagging the market.

In local news, The dean of the Central University of Venezuela (Universidad Central de Venezuela), said in Thursday that Ricardo Sánchez, an 18 year old student at the School of International Studies, was arrested and tortured by the government's secret police (Disip) after participating in a protest against Chavez.

The president of the new foreign exchange commission, Edgar Hernández, said that requests for dollars will take 3-4 days, with a maximum of 45 days. Only those who are registered with the Seniat (tax collection agency) or in the National Institute of Statistics will be able to buy foreign currency. He added that only 317 exporters out of 1000 are included in the Seniat registers. Finally, he announced the creation of a Penal Law on Foreign Exchange Crimes, which will delineate "sanctions against those who violate the exchange controls system."

A US congressional committee is expected to visit Venezuela from February 14-16. The delegation, which includes Chavez's friend, Cass Ballenger (North Carolina republican); William Delahunt (Massachusetts democrat) and Gregory Meeks (New York democrat), are seeking ways to "contribute to the search for accords in the Venezuelan political process." I don't expect much to come from this initiative, as Cass Ballenger has normally kow-towed to the president. Still, I hope that the delegation also meets with opposition leaders.

Commentary Where does Venezuela's domestic problem become problematic for the United States? For several reasons. Despite Opec's production increases to offset Venezuelan's decreased output, "U.S. oil inventories have plummeted to 269.8 million barrels, their lowest level since 1975, according to the U.S. Energy Information Agency." The low US stocks, compounded with fears over war "have helped send the price of petroleum soaring, with the U.S. benchmark surging to $36.36 a barrel Thursday, up 59 cents, in trading on the New York Mercantile Exchange." Therefore, "U.S. average pump prices, which climbed eight cents to $1.61 a gallon for regular grade last week, have risen 16 cents since the beginning of the year." Higher gasoline prices means higher inflation, at a time when the United States is facing an economic slump. Furthermore, let's be clear that Venezuela is only producing around 1.3-1.4 million barrels per day, and part of that is used domestically. If the US were to go to war with Iraq, and supplies from the Middle East were threatened, Venezuela could not guarantee an amply supply of oil to the United States, regardless of what the government claims. Therefore, if Bush pursues a war strategy, the Venezuelan crisis could become a US crisis. Furthermore, as more and more Venezuelans face unemployment, insecurity, and the threat of violence, they will head north or east looking for stability. The US, particularly Florida officials, warmly received the first wave of Venezuelan immigrants, as upper middle class Venezuelans deposited their dollars in local banks and invested them in local industry, prompting Weston officials to joke that the city was planning to erect a bust of Chavez in the town square to thank him for so much wealth. While the recently fired PDVSA engineers, scientists, managers, and technicians will likely head to the US and Europe looking for work, and will compete with highly qualified domestic professionals for the precious jobs available in the white collar market, their percentage is small. The big wave of immigrants will be desperate for any jobs available in the already suffering economy. Many won't come by plane with visas, but in ships, concealed in containers. This is the sad but dramatic truth. Once on US land, with escalating violence in Venezuela, it will be perceived as a human rights violation, NOT to grant them exile. Therefore, US officials should consider the Venezuelan problem as a US problem, for oil and immigration issues.

Opinion Today's opinion, "Venezuela is shaping up as "elected dictatorship"" is by the influential Miami Herald columnist Andres Oppenheimer, who argues that "Chávez may use focus on Iraq to crack down on private media". In fact, while the opinion piece is way behind the curve, he is still the first US columnist to openly use the concept of "dictatorship". In addition, I'd like to draw your attention to an important piece by Stephen Johnson at the Heritage Foundation, who argues: "The only way to rescue Venezuela's viability as an energy producer and trade partner is to help restore democracy by bringing sustained pressure on President Hugo Chávez to allow a peaceful, constitutional vote on his mandate and then supervise the resulting campaign and vote to safeguard political and civil liberties until the Venezuelan government is able to do so itself." The article is available at www.heritage.org.

E-mails I've also included an e-mail (in Spanish) at the end, written by a PDVSA worker from La Campina, the World Corporate headquarters of PDVSA, located in Caracas. It describes the National Guard's treatment of the workers, how their personal belongings disappear or are placed in boxes, as soldiers scream at those who wander through. It is a sad read for those whose family and loved ones love the oil industry and PDVSA, but necessary for those following the crisis.

Events February 22 is The World Day of Prayer for Venezuela. Venezuelans from New York, New Jersey, and Connecticut are invited to the Holy Family Church (315 E. 47 Street) near the United Nations at 3:00 PM for the "Mass for Peace and Reconciliation in Venezuela". Afterwards, a meeting will be held in the rectory hall to discuss concerns and future projects. Also, the Venezuelan organization AVENY is planning a concert on February 19, at the Blessed Sacrament Church, with the following performers: Aquiles Báez, Simón Díaz, Gonzalo Grau, Marco Granados, Omar Ledezma, Jose Angel Pérez, Julio Briceño (Los Amigos Invisibles), Luisito Quintero, Neil Ochoa, Marisabella Méndez. (For further information, call 1(917) 5194393- 1(646)2446692-1(917)5194752) In addition, the Latin American Cinema Festival takes place February 10-17 (www.lacinemafe.com). (Check www.11abril.com for details). On February 24 at 12:00 pm, Columbia University will hold a panel discussion between IESA professor Michael Penfold and UCV professor Samuel Moncada. The panel is in room 802 of the SIPA building on 118th Street off of Amsterdam Avenue.

I hope you are safe, content, and peaceful, wherever this e-mail finds you.

Email written by a PDVSA worker from La Campina Situación Piso 12 Torre Oeste La Campiña

Compañeros Piso 12, a continuación les informo la situación del Piso de acuerdo a conversación sostenida con una persona que está trabajando:

1. Hoy en el Piso 12 se estaban recogiendo todas nuestras pertenencias, las cuales se están metiendo en cajas. La operación la están llevando a cabo entre 1 y 2 personas por oficina junto con representantes de una notaria. Esto lo dirije un militar retirado. Todos los modulos fueron violentados y las micros desaparecieron, su destino: Incierto.
2. Magda se reintegró a trabajar hoy.
3. Las persona trató de ingresar a su oficina al 12 para sacar sus cosas personales, y recibió mal trato del militar retirado quien le gritó: "Qué haces tu aquí", "Fuera", "Fuera". La persona acudió a alguien de PCP, quien le dijo al militar, jefe del comando de vacio del piso, que dejara a la persona sacar sus cosas ya que dicha persona estaba trabajando.
4. Parece ser que si alguien va al edificio a tratar de recoger sus cosas, lo obligan a firmar la famosa carta. Esto solicité me lo averiguaran mejor.
5. Hay personas despedidas (ya en lista) que se han reintegrado. Los obligan a pasar por el Piso 1 de la Torre Este y ahí te obligan a firmar la famosa carta, bajo un formato que llaman: Solicitúd de Reclamo donde haces una declaración de hechos.
6. En algunos casos, los que no han salido en lista, no pasan por el Piso 1 de la Torre Este.
7. Hubo una asamblea en el Auditorium. La Linea de Mando, como se llama ahora la nueva gerencia, sugirió la posibilidad de reincorporar a todas las personas. Sin embargo, los trabajadores de la Base se pararon y gritaron: "No los dejen volver, que se jodan, que se jodan..."
8. Esta famosa Base también solicitó a gritos en el auditorium a la Linea de Mando que a todos los gerentes de primera linea que estuvieran solicitando jubilación, que no se la dieran, "que los botaran y que se jodan".
9. La persona también me comentó y les confieso que esto fue como si me dieran un golpe en el estómago, que el nombre de PDVSA que estaba en la pared de la recepción de la Torre Oeste, donde están las muchachas recepcionistas fue eliminado y ahora dice MEM.
10. Las recepcionistas del PH donde ahora está el MEM, fueron pasadas a la recepción de Planta Baja de la Torre Oeste.
11. En casi todos los pisos hay Guardias Nacionales. Estoy tratando de averiguar cuál será el destino de nuestras cosas personales, las que queden!!. Saludos

Daily International News Review, Venezuela

www.veninvestor.com Dr. Jose Maria Barrionuevo, Director of Emerging Markets Strategy, Barclays Capital

For investors it’s all about cash flow. For Venezuelans it’s all about democracy. Venezuela has had one of the strongest cash flows in emerging markets. Venezuela has also one of the oldest Latin American democracies. Oil prices used to be all investors cared about. That has changed now. Venezuela’s sharp cash flows and its democracy no longer follow separate ways. With sizable revenues in dollars and spending in local currency, cash flow mismatches were easily resolved. Venezuela’s public debt stock was low as well, further contributing to a manageable cash flow. Large oil exports gave Venezuela sizable dollar inflows and fiscal revenues. When the government spent more Bolívares than it earned, all it took to correct the imbalance was to devalue the currency enough to match Bolívar revenues with those spent. Not surprisingly, oil prices were the leading driver of Venezuela’s financial performance. Higher oil prices improved creditworthiness as credit expanded and growth strengthened. Low oil prices, however, contracted credit, weakened growth and led to fiscal imbalances. Devaluation would then close the imbalance. Venezuela’s oil richness created a steady reliance on imports of foreign goods and open trade. Most of the oil dollars were eventually exchanged for foreign goods and, during good times, used to build the country’s dollar reserves position. Some 70% of Venezuela’s basic basket is indeed imported. Not surprisingly, a relatively low content of nontradable goods meant that Venezuela didn’t need the severe economic adjustments that traditional Dutch disease countries experience. Hugo Chávez changed this picture dramatically. Despite presiding over an era of record-high oil prices and one of the sharpest devaluation that should’ve improved cash flows, Mr. Chávez has pushed Venezuela into one of the greatest economic devastations witnessed in Latin America. Cash flows in fact collapsed, risking debt default this year. By the time controls were introduced just over a week ago, the Bolívar had plummeted from Bs750 in early 2002 to a low of Bs1,925 in the official market and Bs2,500 in the black market. The economy is collapsing by over 25% during the first quarter, an economic devastation only seen during the US Great Depression, but in three years! The previous years of the Chávez era were not much better. The recession was -7% in 2002, after modest growth in his first three years. Despite the recession, inflation continues to climb from the 12% low achieved in 2001 to 33% in 2002 and to a likely 49% this year. While price controls will obscure this for the world, Venezuelans will undoubtedly feel it. Venezuela’s once 26% of GDP public debt is now about 40% and will rise to 46% this year, due to the massive devaluation and the severe recession. Still, Venezuela’s fundamentally strong position can be seen in how quickly the country could turn around, should the political crisis be resolved prior to complete economic annihilation. Public debt would fall to 34% of GDP next year should the Bolívar appreciate to Bs1,750, inflation fall to 21.0% and growth rebound to 7.9%. This won’t be easily achieved because a solution of the crisis involves the departure of Mr. Chávez. Despite recently improved oil production, oil exports will level off at half of where they were before a successful oil strike, crippling the ability of the Chávez regime to survive. Recently introduced foreign exchange controls are building a new dynamics that would undoubtedly exacerbate economic and social pressures, as inflation pressures and scarcity of basic goods cripple the country as well. Given all this, there are three possible endings to Venezuela’s worst political crisis. The first and only peaceful ending requires that the international community as represented by the Six Amigos (six friendly nations) persuade Mr. Chávez that a revocatory referendum on August 19th, as suggested by former US President Carter, is the best way out of the crisis. The proposal would make August 19th an irrevocable date, but it would allow Mr. Chávez to run for the presidency a month later. The August 19th revocatory referendum is contemplated by the constitution, as Mr. Chávez has recognized. Mr. Carter also proposed an alternative solution that involves reducing the presidential term to four years from six for both the president and congress, followed by elections thereafter. This would involve major changes to the constitution and, hence, turn into an uncertain, lengthy process. But August is too far away for the millions of Venezuelans that struggle every day to survive the Chávez regime, especially now that the economic debacle is unsustainable. The best solution for Venezuela’s political crisis is therefore that the international community on behalf of the Venezuelan people set a timetable for elections to be held soon. This won’t happen, though, because the Six Amigos believe that a constitutional order is in place in Venezuela. It isn’t. And it would serve well the international community to recognize that there is no constitutional order in Venezuela today. Mr. Chávez has changed the judicial and legislative powers to respond to his demands and this is why Venezuelans need help in restoring democracy. He wants Venezuelans to abide by a constitution that he has violated repeatedly. The international community needs to set a binding date for elections soon and, should Mr. Chávez not abide by them, be prepared to stop recognizing the legitimacy of his government and, through a United Nations resolution, intervene to restore democracy in Venezuela. The second ending and, still a probable outcome, is that the new wave of basic goods scarcity and further economic attrition that follows the introduction of foreign exchange and price controls leashes a new wave of repression. The beginning of the end and, indeed, the greatest success of the Venezuelan opposition began when the Chávez regime was forced to adopt foreign exchange control to protect the rapidly depleting dollar reserves. Because the goal was to hit the government’s cash flow irreversibly, the opposition’s strike was no doubt successful. The measure, however, will exacerbate the political crisis as basic goods supply falls and inflation rises. Mr. Chávez is already sending the military to seize the dwindling inventories of food and basic goods and will next force businesses to increase production as well. Venezuela’s private businesses would refuse to comply, exacerbating the repression backlash. The recent success of the government to restore oil production to under one-half of where it was prior to the strike is only based on making “natural flowing”, light oil wells operational again. With oil production likely to level off at 1.5 million barrels per day, cash flows will continue to falter and controls will be kept. The recent bouts of repression could reach new heights when the Venezuelan people, poor and rich alike, continue to unite to demand Mr. Chávez’s resignation, as scarcity worsens and inflation climbs quickly. The critical question is whether the military would follow orders to repress the people, paving the way for an outright dictatorship. It is probable that some factions of the military would open fire against unarmed civilians, as it is suspected happened on April 11, but it’s unlikely that they would engage in the kind of systematic repression that would end in a Castro-like dictatorship. In this outcome, hundreds, possibly thousands, of Venezuelans would die, but Mr. Chávez would have no choice but to leave as the military demands his resignation. The third and final ending, of course, is that Mr. Chávez succeeds in reaching his ultimate goal of installing a de-facto dictatorship. He would then rule over a country of poor, in which limited oil production would be destined to make his regime endure thanks to the support of thousands of men from Havana now serving in Venezuela. Because Venezuela’s democracy has endured many past crises and the international community will oppose the installation of an outright dictatorship, Mr. Chávez’s strategy has been based on a process of economic attrition in which, by devastating the private economy, is forcing thousands of Venezuelans to leave the country. Many foreign multinational companies are leaving as well, including Honda, Microsoft and now Procter and Gamble, which used to handle its entire Latin American business out of Venezuela, and Coca Cola, which is for sale. In an effort to isolate the country, Mr. Chávez is now getting ready to close down television and radio stations as well as to expropriate private schools. He is doing all of this expeditiously while the world’s attention is on Iraq. The clash between dwindling cash flows that would make the Chávez regime collapse and the growing opposition that seeks to restore democracy suggests that Venezuelans, in cooperation with the international community, need to take three actions to bring an end to the crisis. First, they need to focus on one electoral proposal that is workable for the international community in the shortest timeframe. Instead, they’ve been engaged on varying strategies that involve setting either a Constitutional Assembly or having Venezuelans sign petitions to show their will. These are on top of the Carter proposals and of the negotiations conducted by the Organization of American States. Being all over the place, of course, only helps Mr. Chávez. The success of the opposition hinges on the support of the world in setting a binding timetable for elections based on one proposal. Second, they need to register a new political party that represents the twenty million of Venezuelans that oppose the Chávez regime. This would show the real unity and will of the Venezuelan people in pursuing a democratic solution and would focus everyone on the only real solution of the crisis: elections. Third, they need to announce a presidential candidate for the opposition party to rally the many Venezuelans that are already campaigning for change. To hold elections, a candidate is needed to run against Mr. Chávez. A presidential candidate would also provide one voice to lead the millions of courageous Venezuelans that have stood up to the Chávez regime. The Venezuelan opposition has many strong leaders to pick from, including Messrs. Fernández, Mendoza, and Ortega, among others. If Venezuela is to succeed in restoring its democracy, it needs to tell its people and the world who the presidential candidate is and how he or she would unite all Venezuelans to pull out of the crisis.   —     José M. Barrionuevo Director of Strategy Barclays Capital, Inc. (212) 412-3306

 www.veninvestor.com The following is an article written by Veninvestor’s Alexandria Beech on a conversation with two oil experts that characterize the real issues related to the government’s ability to raise oil production. As the weeks roll on, the oil strike in Venezuela emerges as the main card in the opposition's favor. Those who understand the oil strike, including details of the Venezuelan oil industry, will have a firm idea of whether the government will be forced to negotiate, or whether all sides will sink in obstinacy. Oil represents not only revenues but the nation's life blood. As the government announces higher and higher levels of production, it's important to keep a tight finger on the actual pulse of production, so that we aren't swindled or misled. Recently, I spoke with two local oil experts, Charles Beech, an Oil Contractor, and José Torres, a PDVSA production superintendent, who spend time with the on-site workers who actually see figures right off the barrel counters on pipe lines and tank storage levels. Charles told me that neither investors nor the opposition should feel worried when the government announces production increases, such as the 1.6 million barrels announced by Vice President José Vicente Rangel earlier this week.  It's all psychological warfare. The government thinks that if it can convince the world that it's back in the oil game, it will demoralize the opposition and gain an upper hand in negotiations. It hopes that PDVSA workers will wander back to work. However, the people on the oil fields have a very different take on production, which they say will only increase up to a maximum of 1. 5 million barrels a day, and then level off. The only wells functioning in Venezuela today are natural flowing, that is, they pump light oil that naturally flows to the surface. Both experts told me that the government is already starting to have production problems with the natural flowing wells in Pirital and El Carito in Monagas state. The problems are due to the formation of asphaltene, a very heavy substance made of hydrocarbon molecules that bind and harden at high pressures. This "asphalt-like" substance creates plugs on the anulars on production tubing and formations.  It also builds up on the walls of production tubing and lines - slowly choking a well.    Therefore, chemical and mechanical procedures need to be implemented to counteract the effects of the asphaltene. This is called "servicing an oil well." Wells are serviced by specialized national and international companies that have materials, equipment, and know-how.  Mr. Torres said that most of the companies that service oil wells are currently on strike.  Charles says that "most well service contractors are not willing to work until PDVSA sets a payment schedule for old debts owed since last year.  In the case of transnational companies running marginal fields, these companies bill and get paid every quarter; the last payment cycle was due in December. Since none of these companies were paid, they were unable to pay the contractors who then suspended their services or are in the process of suspending their services." Until they are serviced, the wells that are "plugged up" will remain inoperable.  In Northern Monagas, the "contractors who service the wells are mostly international; due to the depth and high pressures of the wells, the service is a highly technical and dangerous work ." Many companies refuse to operate in that region.  The government is attempting to reactivate secondary wells to offset production drop-offs on these wells.  On Tuesday, "they opened up production in the Musipan field and closed it up again today for unknown reasons."    Besides the formation of asphaltene, other problems are likely to cap off production at naturally flowing wells. Part of the process of production is separating oil from water. American companies normally supply the chemicals that separate these two substances. However, these companies have stopped providing the proper chemicals. Moreover, the government is having difficulties with water handling, according to Mr. Torres. Due to a lack of skilled labor, the government is experiencing difficulties processing the water properly.  As more oil is produced, the government will likely face greater problems disposing of the water filtered from the process. Another problem confronting the government is that some wells are being "overproduced". Like a car that is too revved up to run, over production takes place when production is "run at greater speeds than the capacity of a unit," according to Mr. Torres. This damages the wells and the reservoirs of water. Allegedly, while Mr. Chávez has succeeded in reaching peak production in Northern Monagas, government oil workers are panicking because of overproduction in several wells. A final problem slowly turning into a media nightmare for the government is the amount of gas it is burning. The government's own rules limit burning up to 2% of daily gas production. Currently, Mr. Torres says that “the government is burning 20% to 30% of daily gas production”. As a result, the government is running out of gas supplies. Further, when burned at high levels, according to environmentalist Luis Alfredo Brunicardi, "gas contains high levels of hydrogen sulfur contents, generating sulfur dioxide, which produces acid rain and contributes to the greenhouse effect and global warming." The oil currently being produced in Venezuela is light, which accounts for 62% of total Venezuelan oil. A common myth is that most Venezuelan oil is heavy crude.  But of the total 3.3 million barrels of oil produced under normal circumstances, only 1.28 million barrels or 38% were heavy crude, according to Mr. Torres. Still, the government will not be able to produce heavy crude until the strike ends, because of the pumping procedures required.  Heavy crude, however, is not as profitable and commercial as is light crude. Furthermore, Charles adds "to restart the heavy crude fields will require that personnel start each well individually since production was stopped without circulation in the majority of these wells. Therefore, it will be extremely difficult to start these wells since they use the common methods of electrical submersible pumps and progressive cavity pumps as artificial lifting systems." Currently, Zulia state is producing approximately 600,000 barrels a day. The wells in Monagas State in Eastern Venezuela are producing around 700,000 for a total of 1.3 million barrels of light crude. All experts agree that it is impossible that this number will increase beyond 1.5 million barrels per day while the strike lasts. I'd like to end this piece with a human angle that in the end matters the most. Both Mr. Torres and his wife worked for PDVSA for many years. Each day, dissident PDVSA workers find out that they have been fired by reading their names in the local newspaper. Mrs. Torres already read her name on the list of workers fired. We can only hope that the international community steps up pressure to restore democracy in Venezuela so that day never comes when Mr. Torres reads his name too.   —  Alexandria Beech      Veninvestor

www.veninvestor.com February 14-16, 2003 Good day,   Venezuela disappeared from the international news radar, except a a couple of wire articles and an extremely important piece in the Wall Street Journal. The papers ignored the country, only two days after that the National Assembly approved the text of a historic measure, the Law of Social Responsibility for Radio and Television, which is the first step towards the systematic censure of the country's media. While the law has yet to be passed, the government's party dominated National Assembly will now begin the next phase of debating its articles.  (The country's telecommunications regulatory agency, Conatel, already ordered Globovision, a 24 hour news channel, to begin airing three hours of children's programming per day, between 3 and 8 pm. The channel refuses, saying that being obligated to change its format would violate article 58 of the Constitution, which states that all persons have the right to receive opportune information.) Another important item missed by international news is that yesterday, 597 more PDVSA workers were fired, bringing the total to a whopping 12,400 out of an initial 40,000.   The Wall Street Journal reports that "Venezuela's oil industry is expected to remain hobbled indefinitely even after the current strike is settled", which "could leave global petroleum markets vulnerable in the event of war with Iraq and increase the prospect of further gasoline-price increases." It poses that production levels will not exceed 2 million bpd this year, "hindered by a lack of experienced employees and managers." Analysts place current production at 1.4 million barrels per day, largely ignoring Chavez's 1.9 figure.  Our contacts in the field estimate that oil production will level off at 1.5 million barrels per day. In addition, the Journal reports that "Venezuela has permanently lost as much as 400,000 barrels a day, or more than 10% of its total output," as low-pressure wells fill with sand, older wells need maintenance, and "Venezuela's signature heavy petroleum, meanwhile, tends to congeal when shut down and may take months to get flowing again."   Meanwhile, "storage bottlenecks have prevented heavy-oil joint ventures from resuming production." While Exxon said it planned to load synthetic crude, "Sincor, an extra-heavy-oil operation shared by TotalFinaElf SA, Statoil ASA and Petroleos de Venezuela, said it may resume production in weeks, but that depends on whether the venture can get enough natural gas to break down the heavy petroleum and make it usable in U.S. Gulf Coast refineries." Natural gas has been scarce since the beginning of the strike. Charles Beech, a local contractor, told me: "that was the key: shut down gas production and refineries automatically shut themselves down, as automated safety measures are self implemented by these state of the art facilities." In addition, he says that "PDVSA as of yesterday was compressing 4598 million cubic feet of gas daily, it´s normal pre-strike levels were 9400 million cubic feet per day, therefore they are 49% to pre-strike levels." Moreover, the Journal reports the "problems are compounded by a natural production-decline rate across the industry of 20% a year, which is particularly steep." Mr. Beech says that "as natural flowing well formations are over produced, reservoir pressures will start to decline, especially in the north Monagas fields which have accounted for most of the production increases in Venezuela. " In many of these wells," he continues, "we have information that chokes have been removed, and are presently producing at their maximum capacity." Chokes are implemented as a mechanism of preventing the over-production of a well, guaranteeing a longer and more productive life for the formation. Moreover, workers hired during the strike lack knowledge of the wells, "especially those that require technical expertise to force oil to the surface."   In addition, "Venezuela's failure to restore normal operations at its five refineries has created severe domestic gasoline shortages that have led the country to buy the fuel from Europe and the U.S. -- gasoline that normally would be produced and stored to prepare for the U.S. summer driving season. In the past month, Venezuela, normally a gasoline exporter, has purchased more than 12 million barrels of gasoline, some of which is still due to arrive," according to the Journal. Lifting the strike in other sectors actually helped the opposition, as an increase in domestic gasoline demand has created further social discontent and increased pressure on the government to negotiate for early elections.   The Venezuelan benchmark DCB's are currently trading at 69(bid) and 69.14 (ask) for a bid spread of 1,865 basis points, lagging the market.   In local news, The dean of the Central University of Venezuela (Universidad Central de Venezuela), said in Thursday that Ricardo Sánchez, an 18 year old student at the School of International Studies, was arrested and tortured by the government's secret police (Disip) after participating in a protest against Chavez.   The president of the new foreign exchange commission,  Edgar Hernández, said that requests for dollars will take 3-4 days, with a maximum of 45 days. Only those who are registered with the Seniat (tax collection agency) or in the National Institute of Statistics will be able to buy foreign currency. He added that only 317 exporters out of 1000 are included in the Seniat registers. Finally, he announced the creation of a Penal Law on Foreign Exchange Crimes, which will delineate "sanctions against those who violate the exchange controls system."   A US congressional committee is visiting Venezuela from February 14-16. The delegation, which includes Chavez's friend, Cass Ballenger (North Carolina republican); William Delahunt (Massachusetts democrat) and Gregory Meeks (New York democrat), are seeking ways to "contribute to the search for accords in the Venezuelan political process." The delegation, which was not able to meet with Chavez, said that the means to reconciliation is through strenghthening the National Assembly.   Commentary   Where does Venezuela's domestic problem become problematic for the United States? For several reasons. Despite Opec's production increases to offset Venezuelan's decreased output, "U.S. oil inventories have plummeted to 269.8 million barrels, their lowest level since 1975, according to the U.S. Energy Information Agency." The low US stocks, compounded with fears over war "have helped send the price of petroleum soaring, with the U.S. benchmark surging to $36.36 a barrel Thursday, up 59 cents, in trading on the New York Mercantile Exchange." Therefore, "U.S. average pump prices, which climbed eight cents to $1.61 a gallon for regular grade last week, have risen 16 cents since the beginning of the year." Higher gasoline prices means higher inflation, at a time when the United States is facing an economic slump. Furthermore, let's be clear that Venezuela is only producing around 1.3-1.4 million barrels per day, and part of that is used domestically. If the US were to go to war with Iraq, and supplies from the Middle East were threatened, Venezuela could not guarantee an amply supply of oil to the United States, regardless of what the government claims. Therefore, if Bush pursues a war strategy, the Venezuelan crisis could become a US crisis. Furthermore, as more and more Venezuelans face unemployment, insecurity, and the threat of violence, they will head north or east looking for stability. The US, particularly Florida officials, warmly received the first wave of Venezuelan immigrants, as upper middle class Venezuelans deposited their dollars in local banks and invested them in local industry, prompting Weston officials to joke that the city was planning to erect a bust of Chavez in the town square to thank him for so much wealth. While the recently fired PDVSA engineers, scientists, managers, and technicians will likely head to the US and Europe looking for work, and will compete with highly qualified domestic professionals for the precious jobs available in the white collar market, their percentage is small. The big wave of immigrants will be desperate for any jobs available in the already suffering economy. Many won't come by plane with visas, but in ships, concealed in containers. This is the sad but dramatic truth. Once on US land, with escalating violence in Venezuela, it will be perceived as a human rights violation, NOT to grant them exile. Therefore, US officials should consider the Venezuelan problem as a US problem, for oil and immigration issues.   Opinion

Today's opinion, "Venezuela is shaping up as `elected dictatorship'" is by the influential Miami Herald columnist Andres Oppenheimer, who argues that "Chávez may use focus on Iraq to crack down on private media". (www.miami.com)  While the opinion piece is way behind the curve, he is still the first US columnist to openly use the concept of "dictatorship". In addition, I'd like to draw your attention to an important piece by Stephen Johnson at the Heritage Foundation, who argues:  "The only way to rescue Venezuela's viability as an energy producer and trade partner is to help restore democracy by bringing sustained pressure on President Hugo Chávez to allow a peaceful, constitutional vote on his mandate and then supervise the resulting campaign and vote to safeguard political and civil liberties until the Venezuelan government is able to do so itself." The article is available at www.heritage.org.

Events

February 22 is The World Day of Prayer for Venezuela. Venezuelans from New York, New Jersey, and Connecticut are invited to the Holy Family Church (315 E. 47 Street) near the United Nations at 3:00 PM for the "Mass for Peace and Reconciliation in Venezuela". Afterwards, a meeting will be held in the rectory hall to discuss concerns and future projects. Also, the Venezuelan organization AVENY is planning a concert on February 19, at the Blessed Sacrament Church, with the following performers: Aquiles Báez, Simón Díaz, Gonzalo Grau, Marco Granados, Omar Ledezma, Jose Angel Pérez, Julio Briceño (Los Amigos Invisibles), Luisito Quintero, Neil Ochoa, Marisabella Méndez. ( For further information, call 1(917) 5194393- 1(646)2446692-1(917)5194752.)  In addition, the Latin American Cinema Festival takes place February 10-17 ( www.lacinemafe.com). (Check www.11abril.com for details.) On February 24 at 12:00 pm, Columbia University will hold a panel discussion between IESA professor Michael Penfold and UCV professor Samuel Moncada. The panel is in room 802 of the SIPA building on 118th Street off of Amsterdam Avenue.   I hope you are safe, content, and peaceful,   Alexandra Beech Thanks to Sol Maria Castro, for local news research.

www.vcrisis.com Universidad Central de Venezuela February 2003

The Venezuelan education system is plagued with problems that put its schoolchildren in the rear seat when compared with other countries in the region. Schools are frequently understaffed, teachers are underpaid and a docent's job is generally seen as undesirable so a significant percentage of teachers are there more out of necessity than by vocation or choice. The drop-out rate is high, test scores are disastrous, and results in terms of funds invested per graduate is a financial fiasco. Even though education is free, many children can not attend classes because economic necessities oblige them to work. These problems have been recognized by the present administration and steps have been taken to enroll more students within the school system, improve existing institutions and fund new ones. Teachers were given significant pay raises and the educational importance of internet was demonstrated by the government's creation of numerous cyber-cafes, sometimes even in the most remote towns of the countryside. Unfortunately this government's intentions towards reform and providing equal access to education has encountered numerous problems, many of which are self-generated.

Undoubtedly the first major criticism was sparked by the attempt to introduce political indoctrination into school textbooks and the infamous Act 1011 which created a new type of school inspector with broad powers to penalize schools and their directors. This was received with strong resistance by many citizens and was probably the birth of organized opposition by Venezuelan civil society to the government. Amongst the criticism it was pointed out that the sweeping powers of the proposed inspectors guaranteed new opportunities for bribes and there was precedence for suspecting such "privileged work" would be awarded to loyal party members. After much political and legal wrangling the government was defeated in the courts. Private catholic schools constitute an important portion of the educational system and cater to a variety of students, ranging from the nation's elite to the poorest of poor. They have traditionally received government subsidies, but when catholic schools became prominently involved in opposing Act 1011 the government threatened to cut subsidies. Notwithstanding government hand outs, an analysis rapidly reveals the greater cost-effectiveness of private schools when compared to the public system, both in terms of the number of graduates and test score results. The threats have since materialized and at the time of writing many educational programs in city slums and distant rural areas are threatened with closure.

At the elementary school level the government proudly announced the founding of numerous elementary level Bolivarian Schools, showcases of progressive education equipped with the latest technology and providing daily meals for students. This initiative is commendable but simultaneously raises questions such as why not reform and properly support schools already in existence? Because of budgetary limitations funding was diverted from the functioning of regular schools into the new program and this has had a negative impact on the non-Bolivarian Schools. Previously many public schools, in agreement with most parents, charged a modest sum for registration that helped in defraying the cost of materials such as paper, chalk or even janitorial goods. A Presidential decree declared this practice illegal since education should be free, but no financial support was put forth to pick up the slack and the situation has worsened for non-Bolivarian Schools.

Many schools function with two groups of students, one in the morning and another in the afternoon, but unfortunately in such cases the installation of a Bolivarian school forced the elimination of one group, given physical limitations, forcing a number of students to attend schools much further away or simply abandon their studies. The daily meals program is nothing new as previous administrations also tried to implement programs such as the "school lunch," "school uniform" or "school backpack" just to name some. They all eventually were undermined by administrative ineptness and graft, and the Bolivarian Schools are unfortunately treading the same path. One thing is the number of these institutions according to the government and another thing are those actually functioning. How many were built but never started to function? How many still serve daily meals? How many are staffed by teachers and administrative personnel that obtained their jobs through professional merits instead of being party members? What is the student desertion rate? Finally, if the Bolivarian Schools are so good as the government boasts them to be, why do most government officials, including President Chavez, send their children to private catholic schools? Another questionable educational innovation of this government has been the introduction of "pre-military training" in the school agenda to replace the previous civic studies agenda. The new course includes well-intentioned notions of national identity, values and ethics, but the textbooks include paragraphs that easily generate xenophobia and class-hatred.

The start of the school year this January was problematic due to the strike and its effects. The government has countered everything is normal and emphatically insists no child may be denied the right to education. In primary school runs by a school district headed by an opposition mayor the institutions were taken over by pro Chavez groups, and they have since been giving classes to the few children in attendance. Most of these "volunteers" have no legal teaching credentials and some parents have complained of political indoctrination. During a visit by reporters to one of these schools and an interview with a provisional teacher, a school girl was asked how she was getting along. She replied that she was extremely happy and had learned more these past weeks than during all previous months with her regular teachers. As she spoke she gradually broke down and could barely complete her sentence before running off in tears. The children of striking oil company workers have been kicked out of the schools run by the oil company, an especially grave event in remote rural areas where no other schools are available. At the university level the government owes most public universities about five months of budget quotas and expects the universities to function normally.

The deterioration of public secondary education has been paralleled by an increased proportion of university enrollment by students from private institutions. Unfortunately the propositions forwarded by many pro-government activists to address these inequities imply lowering admission and academic standards to the extent of almost no accountability on part of prospective students. Undoubtedly an easy way to achieve "equality" and lower drop out rates, but questionable in terms of providing quality higher education. Such simplistic solutions are wonderfully exemplified by a public announcement over a year ago by President Chavez when he promised the founding of a new university for the poor in Caracas, in principal a good-intentioned proposition but problematic in practice, starting with the fact that he proposed it function within the Miraflores Palace, a national historical monument. Needless to say this idea has not been mentioned since.

In terms of higher education problems are paramount and reforms are sorely needed for more efficient management of the many public universities which take the lion's share of the nation's educational budget. Unfortunately government intentions seem more geared towards political control than towards improvement in standards or administration, a trend that has become currently more obvious. Two years ago in elections for new authorities in the nation's largest university, the Universidad Central de Venezuela (UCV), the government backed candidates were defeated. Some months later a small group of students took over the campus council office by force and stayed there for a number of weeks, all the while receiving logistical support from the central government. Their vandalism was accompanied by violence, including pipe bombs, fist-fights, gunfire, tear-gas and fireworks. They demanded, amongst other things, that the newly elected authorities be declared illegitimate and a new government be installed in the UCV. Their use of violence and ensuing disruption of academic life was totally unacceptable. The bitter taste this episode left was detrimental to the renegade's cause as in the most recent student council elections, groups representing the government party suffered resounding defeats in most UCV schools. Another institution, the Simon Bolivar University in Caracas, suffered direct intervention from the government through the majority officially appointed members of its Superior Council, which then proceeded to pressure institutional decisions through financial strangulation and harassment of the lower Directive Council. In subsequent elections for posts in the Directive Council the government-backed candidates were trounced by independent candidates which are now pushing for an autonomous administrative regime that would free the institution from such Central Government intervention.

The problems overshadowing the country's school system have been long in the making and most can not be attributed to the Chavez Government. Unfortunately this administration's intentions for much needed reform in the educational system have been undermined by its preoccupation with political control, and compounded by ineptitude and graft. Such flaws are nothing new, but the intense political motivation is a novelty and of particular cause for concern given the strong centralization of government, rigid political agenda, use of violence, and Presidential authoritarianism that increasingly reeks of dictatorship. Taking this into consideration plus the support shown for pro-government groups regardless of their methods, it is clear the Venezuelan government's commitment to public education is motivated more out of political control than out of providing high quality education for all.